Nifty and Sensex Steady; FMCG Stocks Lead Post-Budget 2024

In early trading, the benchmark indices Nifty and Sensex showed minimal movement, while broader market indices performed better as investors adjusted to the new capital market taxation changes following the Union Budget. The Sensex opened 0.16% lower at 80,303, and the Nifty fell by 0.15% to 24,442. Overall, 1,532 shares advanced, 691 shares declined, and 128 shares remained unchanged.

Kranthi Bathini, director of equity strategy at WealthMills Securities, commented to Moneycontrol that the increase in capital gains taxes was unexpected but aimed at creating uniformity in incentives. Despite the initial reactions, Bathini highlighted that the overall sentiment remains bullish, given the attractiveness of equity as an asset class. He also emphasized the budget's focus on rural consumption and support for manufacturing and MSMEs. The government has allocated ₹2.66 lakh crore for rural development, including spending on rural infrastructure.

Experts believe that strong liquidity is mitigating concerns about high valuations, with robust retail inflows driven by direct equity investments, mutual funds, portfolio management services (PMS), and alternative investment funds (AIFs). The broader market indices outperformed the main indices, trading 0.2% and 0.5% higher, respectively, and have rallied nearly 22% each since the start of the year. The India VIX, known as the fear gauge, remained steady around 13.

Among sectoral indices, FMCG was the top gainer following the announcement of employment-boosting schemes in the Budget, which are expected to increase demand for staples. Bathini noted that the government has introduced five schemes to facilitate employment and skill development for 4.1 crore youth, with a central outlay of ₹2 lakh crore. Hindustan Unilever was particularly active as most brokerages turned positive on the company's prospects.

While most other sectoral indices gained, Nifty realty fell after Finance Minister Sitharaman proposed removing the indexation benefit for some asset classes like gold and property. Experts believe that there could be a short-term impact on realty stocks due to this move.

Conversely, consumer-oriented stocks are likely to rise following the government's announcement related to income tax. The new tax regime has been slightly sweetened, with marginal revisions in the tax slabs and an increased standard deduction.

The realty and metal indices were laggards, with realty being the worst hit, dragged down by DLF and Godrej Properties.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated, "With the steep increase in STCG tax and the marginal increase in LTCG tax on equity now a reality, investors should focus on stocks that can deliver superior returns. FMCG stocks look attractive from a valuation perspective in the current context."

"Watch out for stocks like ITC and United Spirits. It's important to understand that the Budget strengthens the India Growth Story with a focus on growth alongside financial stability. The fiscal consolidation being attempted through the Budget is a significant positive that should not be overlooked amidst concerns about the capital gains tax increase. Another key factor is that the removal of indexation benefits on gold and real estate will make equity a relatively superior asset class," he added.

From a technical standpoint, Deven Mehata, a research analyst at Choice Broking, suggested that Nifty could find support at 24,400, followed by 24,350 and 24,300. On the upside, immediate resistance levels are at 24,550, followed by 24,650 and 24,700. For Bank Nifty, support levels are at 51,600, followed by 51,500 and 51,300, with resistance levels at 52,000, 52,200, and 52,500.

Top Nifty gainers included ITC, Titan Company, HDFC Life, Tata Motors, and Wipro. Major laggards were Tata Consumer Products, HUL, Bajaj Finance, Nestle India, and Britannia Industries.